An investigation between 2009 and 2012 found that a tax evasion scheme took place in which clients bought non-existing emissions reduction purchase agreements (ERPA).
Dr Bruce Rowntree, Mr Rinaldo Manietta and Mr Peter Donkin purchased fake credits in the scheme, promising their clients an immediate reduction to their taxable income in return for a 15 per cent non-refundable deposit as a fee.
The scheme attracted approximately 200 individual and business investors who invested $8.6 million over the four years and claimed deductions totalling over $58.1 million.
Honourable Justice Steven Rares found that the trio had promoted and marketed the scheme with its dominant purpose of helping investors, who had no commercial requirement to purchase carbon reduction credits, obtain a tax deduction that was worth about twice the expenditure on the deposit.
The Federal Court found that Dr Rowntree received $6.4 million for his role in the scheme between 2009 and 2012, with Mr Manietta receiving $1.1 million over the four years, and Mr Donkin receiving $194,320 between 2010 and 2012.
“In my opinion, it is important that the message be sent loudly and clearly that engaging in the promotion and marketing of tax schemes involving tax avoidance and tax evasion, such as occurred in each of the 2009, 2010, 2011 and 2012 schemes, cannot be tolerated by the community,” Justice Rares said.
“Such conduct requires the imposition of a penalty that will achieve both general and specific deterrence, in order to ensure that other persons, and particularly professional lawyers, accountants and financial planners, will not engage in similar activities.”
In welcoming the Federal Court’s decision, the ATO said it remained committed to identifying and disrupting arrangements that exploit the tax system.
“The penalties handed down reflect the seriousness of the conduct and the scale of the scheme,” the ATO said. “The behaviour of the promoters, who received significant financial benefits for their actions, showed little regard for their clients who trusted their advice.
“Protecting individuals and businesses from getting inadvertently caught up in schemes like these is a priority for the ATO.”
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